Neil Ducoff, founder of Strategies
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Neil Ducoff, founder of Strategies

This story was originally posted on Strategies.com, but we loved it so much, we asked for permission to share it. 

After the COVID-19 shutdown, salons and spas reopened to a new economic reality.

The increased costs of PPE, plus the reduced capacity restrictions, meant expense budgets had to be rethought.

Complicating matters even further were employees who chose to remain on unemployment for a while — or not to return at all.

As salons and spas were reopening, Strategies was encouraging owners to raise prices to cover increased costs and capacity restrictions. Some did minor increases while others added a surcharge for PPE.

But there were many owners and independents, with the best compassionate intentions, who chose not to raise prices.

With pent-up demand for services, salons/spas reopened with high productivity rates. Everyone was excited being crazy busy.

As the reopening surge settled in, a new economic and financial reality began to settle in.

Busy employee-based salons/spas desperately need to hire new service providers — but, like damn near all businesses — the number of potential service providers seeking employment is at an all-time low. And the labor market will continue to be tight for the foreseeable future.

Operating at continuously high productivity rates is not sustainable. Consistency suffers and systems breakdown. Everyone needs time to recharge.

It takes time to train and prepare new service providers to deliver your brand promise.

Costs continue to creep up and will continue to do so.

FACT: Now is the time for salons/spas to answer the “charge what you’re worth” battle cry.

REALITY CHECK: The combination of limited service hours available for sale, high customer demand, high productivity rates, and a tight labor market, means it’s time to raise prices. The industry is experiencing a “perfect storm” period for price increases.

We’re not talking a dollar or two increase — I’m suggesting that owners consider a significant service pricing reset.

Why a significant pricing reset? You can raise prices a dollar or two without rocking the boat. But a few dollars increase is only going to offset current increases in operating costs. Productivity rates will remain high. The labor market is going to remain tight at least through 2022. Demand will continue to grow.

Owners must think strategically long-term. Consider the following:

Get ahead of costs: Why just cover increases in operating costs when you can finally get ahead of them? It’s time to hit the pressure release valve on expenses, drive profit and build cash reserves.

Service time standards: Squeezing clients into an already tight appointment book compromises the service experience and your brand. A significant price increase can allow service time standards to be increased without compromising revenue or profit. And … it will prevent burnout from running at abnormally high productivity rates.

Provide employees with added work schedule flexibility: One of the big byproducts of the pandemic is the desire for more work/life balance. If your salon/spa is crazy busy and profit is squeezed tight, it’s time to hit the pricing reset button hard. You can’t offer flexibility to employees when you’re operating at or near capacity and cash flow is tight. The need for work/life balance is real and needs to be addressed.

Increased pay opportunities: Hey, higher minimum wage rates are arriving fast. You can complain about the $15 an hour minimum wage or you can prepare now by resetting your service prices. More importantly, existing employees need to see income growth potential. And it doesn’t matter whether you’re on Team-Based Pay or commission.

Offer more competitive pay: This one is simple. Resetting your service prices will allow you to offer more competitive starting pay rates giving you a competitive edge over your competition.

Here’s my challenge to you: The most correct and accurate way to determine optimum servicing to cover all costs and profit is by calculating your cost per hour + desired profit margin.

If you’ve never done a cost per hour calculation for your salon/spa, this is the non-negotiable first step. Otherwise, you’re just guessing and the days of “guessing” are long gone.

Also, you must overcome the inherent “price increase freak-out factor” of service providers. Too often, even a minor price increase is met with strong resistance and long implementation times simply because many service providers are “afraid” to discuss price increases with clients.

Lastly, if this blog post does anything to encourage you to seriously evaluate your service pricing strategies, it did its job.

The days of salons/spas squeezing out razor-thin profits must end. Don’t miss this “perfect storm” to make a big jump in your service prices.

Want some help? Schedule a free 60-minute strategy session to start building your best salon, spa, or medspa.

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